January 7, 2006

 

US Wheat Review on Friday: Ends lower on speculative correction

 

 

U.S. wheat futures settled lower Friday in a speculative-led retreat from this week's gains that included a match of contract highs by KCBT and MGE March, brokers said.

 

Locals pressured Chicago Board of Trade wheat futures late, with fund sales noted earlier. A mid-morning visit to the trading floor by U.S. President George W. Bush briefly moderated trade, they added.

 

CBOT March wheat ended down 9 cents at US$3.30 3/4 after falling through its 100-day moving average of US$3.35 1/2, while May ended down 8 1/2 cents at US$3.40 3/4 per bushel.

 

Commodity funds sold about 5,600 contracts, brokers said. JP Morgan sold about 1,000 March, the Refco division of Man Financial sold about 1,300 March, R.J. O'Brien sold 500 March, Calyon Financial sold 700 March and DT Trading sold 300 March, brokers said. ABN bought 500 March, FC Stonnee bought 400 March and Prudential Financial spread 500 December/March, they added.

 

Weekly U.S. wheat export sales, at 239,100 for old- and new-crop (2006-07) combined, lagged estimates but were discounted due to holiday trade.

 

Moreover, the Iraqi grain board head denied this week's report that Iraq bought U.S. wheat.

 

In global news, India's decision to cut sales of subsidized grain should boost internal stocks and ease import needs, analysts said. The Indian government has denied its need to import wheat, speculation of which circulated in U.S. wheat markets late last year.

 

 

Kansas City Board of Trade

 

KCBT March wheat settled Friday down 6 3/4 cents at US$3.78 3/4 per bushel after matching this week its contract high of US$3.94. May ended down 7 cents at US$3.77.

 

The KCBT March/CBOT March wheat spread settled at 48 cents, premium KCBT, after closing Thursday at 45 3/4 cents.

 

ADM Investor Serivces sold 400 March, 200 July and 200 December, FC Stonnee sold 200 March and 100 July, Man Financial sold a net 100 March, Prudential Financial sold 100 March, 200 July and 100 September, while UBS Warburg sold 100 March and 50 July, brokers said.

 

Spot cash U.S. HRW basis were steady to weak late Friday, sources said.

 

Drought in Texas and southern Oklahoma, key HRW wheat producers, underpinned deferred KCBT contracts initially, with some sources noting they were less optimistic that spring rains could revive parts of the stressed crop.

 

"My feeling is starting late last week that we were in effect losing acreage right now in Texas and Oklahoma due to the impact of this dry weather," said Mike Palmerino, a meteorologist with Meteorlogix weather service on Friday.

 

"I think we are losing acreage - acreage that will not be worth harvest and will more likely be torn up and probably replanted to a spring crop," he added. "But again, I would confine that idea now to Texas and southern Oklahoma. From about Enid, Okla., and into Kansas, I would say that's not the case."

 

"Statewide, Oklahoma is in the midst of the driest 60 days since they began keeping records in 1921," noted US Wheat Associates on Thursday. "Most of the wheat-growing areas have experienced less than 10% of normal precipitation since Nov. 4, coming off of an autumn that saw less than half of the normal precipitation. Some of the wheat-growing areas haven't seen any precipitation in over 90 days.

 

"The current water index in almost all of Oklahoma wheat country is rated at between 0.3 and 0.5, which is the level at which plants will wilt. (Plants begin dying at less than 0.3 on the scale)," the group said.

 

And despite Hurricane Rita's effect on parts of Texas, rainfall during 2005 was as low as 75% of the long-term average in a large part of the state, the U.S. Wheat Associates said.

 

"All of the wheat-growing areas are in drought or are at least abnormally dry. Acreage planted to wheat is the lowest it has been since 1973, at 5,500 thousand acres compared to 6,300 thousand acres last year. In mid-December, Texas officials were reporting that germination was not possible with the present moisture levels, and there has been no rain since those reports. Statewide, wheat condition was rated at 35% of normal compared with 85% last year," the group said.

 

 

Minneapolis Grain Exchange

 

MGE March closed Friday down 7 cents at US$3.83 1/2 after matching Tuesday its contract high of US$3.99. May wheat settled down 5 1/2 cents at US$3.84 1/2.

 

Cash U.S. spring wheat basis bids were mixed on Friday, with some bids down 20 cents and others up 5 cents, sources said.

 

Minneapolis rail receipts of wheat on Friday totaled 216 cars, above last year's 206 cars. Durum receipts totaled 7 cars, below last year's 23 cars.